Practical sense to know the basics of effective enterprise stock management
What is the role of effective inventory management for enterprise logistics?
This is a question of what is primary and what is secondary in the logistics of an enterprise. Or, in other words, where the horse should be: in front of the cart or behind it.
The logistics function “Inventory management” is a “horse” in relation to all other logistics functions of an enterprise that are “cart”. The role of effective inventory management for the enterprise’s logistics is the master or the leading one: first, a decision on effective inventory management must be made (designed), and then this decision must be “recalculated” into the content of other enterprise logistics functions, including “Warehousing” and “ Management of transportation of goods in the input and output logistics of the enterprise “.
Indeed, let’s think about what is stored in the warehouse. Stocks! Consequently, the warehouse is intended for stocks, and not stocks are created in one size or another depending on the size of the existing warehouse. Therefore, the “Inventory Management” function must first calculate the maximum profitable stock level for each SKU that may occur during stock replenishment by SKU in the designed optimal and effective inventory management system, and then the warehouse designer must recalculate the maximum profitable stock level for each SKU, taking into account the mass – dimensions of its unit of stock in the required size of the working areas of the warehouse. At the same time, these calculations must be made for a prospect of at least 5 years, taking into account the forecast of demand for the company’s products or the forecast of production consumption of material resources.
If we do not design and build or rent a warehouse on the basis of an effective inventory management solution, then such a warehouse with a high probability will be either unnecessarily large or small. In the first case, the cost of storing stocks will be excessive and unreasonable, and in the second case, the warehouse will not be able to perform its functions in relation to the part of the stocks that do not fit in the warehouse. As a result, the size of the company’s net profit will suffer due to its decrease.
Now about the transportation of goods in the input and output logistics of the enterprise. What trucks are transported from suppliers to the warehouse of the logistics of the enterprise. Stocks! Therefore, if the purchasing department orders inventory from the supplier at a profitable (profitable) size for each SKU, then trucks transport inventory at a profitable amount for each SKU. This means that it’s not a stock for an existing (ordered) truck for the company in order to maximize its load carrying capacity or cargo capacity, which usually leads to an overestimated stock level and excessive trucks and warehouses, but the carrying capacity and cargo capacity of the truck should correspond to the weight and volume of profitable orders. by sku.
In the output logistics of the enterprise, trucks transport inventory from the finished goods warehouse, which serves as the central distribution warehouse, to the distribution and sorting regional warehouse of the same enterprise. The regional warehouse must issue orders for the replenishment of stocks by SKU at a profitable rate, which will result in a reasonable opportunity to optimize the load capacity and cargo capacity of trucks by the criterion of an optimal increase in the company’s net profit, since this optimization will be based on effective inventory management.
Approximately 80% or more of the total logistics costs of the enterprise are associated with the logistics activities of the enterprise in inventory management, storage and transportation. Therefore, effective inventory management provides both the satisfaction of customer needs for the required level of customer service from the stock, and a significant optimal reduction in total logistics costs.
How to understand the problems of the enterprise related to inventory management, logistics managers and specialists of enterprises?
If by logistics managers and specialists of enterprises we understand those who have been trained in effective inventory management at Business Consulting Igor Chugunov, then it should be said that they all did not have knowledge of effective inventory management in full. Some aspects of a small part were known, but no one owned the complete system of knowledge. The degree of novelty of knowledge on effective inventory management for them, according to their own estimates, averaged no more than 50%. From the point of view of training, this is normal, since the training should provide the students with new necessary knowledge. What is the use of teaching that which everyone already knows? Before training, everyone had hands-on experience with inventory management. This means that they knew how to manage stocks, but they did not know how to do it effectively.